A year ago, Ireland wasn’t much more than one of two “I” nations of the five little PIIGS who were going to bring down Europe and perhaps the US as well with its onerous debt burden and irresponsible spending practices.
Now, though, Ireland at least has moved out of the shadow of the PIIGS – Portugal, Italy, Greece and Spain are the other members – to cast itself as perhaps the first of the debt-laden nations to make a recovery.
Though far from out of the morass, Ireland’s economy is growing at a modest 1.6 percent pace. Its debt burden as a percentage of gross domestic product for this year is expected to be 109 percent – not cause for celebration but far better than the 150 percent or so that Greece is facing.
As a result, Ireland is slowly regaining its footing in the global marketplace. Investor Wilbur H. Ross has sung the praises of the nation, and its leaders have taken the world stage recently to show leadership in the face of peril.
A piece in Wednesday’s Irish Times from Enda Kenny, the taoiseach, or prime minister, of Ireland, is instructive in how the country has charted its way out of disaster.
Kenny’s remarks and other developments provide three lessons for Greece as it tries to avoid fiscal collapse:
1. Humility: As Greece practices brinkmanship Ireland has employed diplomacy. David Rosenberg, senior strategist and economist at Gluskin Sheff in Toronto, wondered Wednesday about “moral hazard” accompanying the international bailout efforts for Greece. “Did Ireland get a haircut like the one Greece is being offered?” he asked in his morning note.
But Kenny was having none of it.
“It is empathy and solidarity, not envy, that I feel for our fellow EU citizens in Greece,” he said. Detailing the various austerity measures Greece faces, Kenny essentially says, “better them than us.”
“While it is not surprising that a deal of this nature is being put to a referendum by the Greek government, who could possibly want this for the Republic?” he asked.
2.Sensibility. Indeed, there will be no bailout envy in Ireland, simply because the nation knows that not only would it not want draconian measures foisted upon its people from the outside, but also that Ireland would become a global pariah.
“Some have argued that this State should use the restructuring of Greece’s debt as an opportunity to repudiate the deal with our partners and to renege on our own debts,” Kenny wrote. “Such a course of action would be disastrous for our recovery.”
Instead, Ireland will follow its own path toward fiscal sanity that will make it attractive for investors and financiers.
3. Responsibility. Ross isn’t known as one of the world’s premier vulture investors for nothing: He knows a bargain when he sees it and doesn’t hesitate to pounce. What Ross likes most about Ireland is its willingness to stick to its guns – in particular a bargain-basement 12.4 percent corporate tax rate on which it hasn’t budged even in the face of having to close a 16 billion euro budget gap.
“One of the great competitive advantages Ireland has is the lowest tax rate for corporations in the whole European Union,” Ross told CNBC back in August. “Their other advantages are a very young well-educated workforce who is actually willing to work – very novel for Europe.”
Ross also likes the way Ireland slashed its public employment rolls by 13 percent and cut government entitlement payments, something Greece was loathe to do until forced.
“The general people in Ireland feel, ‘OK, there were these excesses, we have to get them out of the system so we can go back and be the Celtic Tiger again,’” he said, using an expression that not all Irish embrace as it harkens back to an economy that brought rampant inflation with its growth. “So they’re willing to go through it and that’s an attitudinal difference between the Irish and most people especially in Europe.”
More than anything, Ireland wants to do whatever it can to make sure that it is not confused with Greece.
“Given our vastly better economic circumstances compared with Greece, default would mark us as a country that won’t rather than can’t pay our debts,” Taoiseach Kenny said, adding that doing so “would strangle recovery and lower living standards for a generation.”
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